Remedies and Alternative Contracts
33 Pages Posted: 27 Jun 2007 Last revised: 9 Mar 2011
Contracts that contemplate alternative possible modes of performance, frequently referred to as alternative contracts, are common wherever written contracts are routinely used and relied upon. Nevertheless, courts in major legal systems have encountered enormous difficulty articulating a consistent and appropriate remedial principle to govern damages when such contracts are breached by the contracting party having the election to perform in alternative ways. This article analyzes this issue, and attempts to identify the most appropriate remedial principle for breaches of alternative contracts. To this end, Part I adopts a positive standpoint canvassing the rules governing remedies in a number of leading common law and civilian jurisdictions and illustrating in the process that remedies for breaches of alternative contracts are not consistently approached across jurisdictions. Indeed, even within several jurisdictions there are inconsistencies. Part II takes a normative approach to the question and illustrates that the most desirable remedial principle is a solution that has not yet been adopted for breaches of alternative contracts. Strikingly, we demonstrate that the ordinary common law remedy for breach of contract can be regarded as a special case of the most appropriate remedial approach for contracts with one or more modes of performance. Part III offers some thoughts regarding the possible reconciliation of Parts I and II, suggesting that existing rules may be normatively justified as the second-best in some circumstances. Part IV concludes with the suggestion that courts adopt the principle that the mode of performance that would be selected by the party with the election if specific performance were ordered be used for the purposes of assessing damages.
Keywords: remedies, contracts, law and economics, optional performance, alternative contracts
JEL Classification: K12
Suggested Citation: Suggested Citation